Capital Budgeting : Technological Advances and Their Impact on Budgeting

Abstract

Capital budgeting is a critical financial process used by businesses to evaluate and prioritize investment opportunities. It involves the assessment of potential long-term investments or projects to determine their viability and alignment with the company’s strategic goals. The process typically includes forecasting cash flows, evaluating the cost of capital, and applying various analytical techniques such as Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period to assess the potential return on investment. Effective capital budgeting helps organizations allocate resources efficiently, manage financial risks, and maximize shareholder value. It requires a comprehensive analysis of both quantitative and qualitative factors, including market conditions, project risks, and potential synergies. By making informed decisions on capital expenditures, companies can enhance their competitive advantage and ensure sustainable growth.